The New Digital Domain

THE NEW DIGITAL DOMAIN How the Pandemic Reshaped Geopolitics, the Social Contract and Technological Sovereignty POLICY REPORT SEPTEMBER 2020 CONTENTS 03 EXECUTIVE SUMMARY 04 DIGITALIZED AND PRIVATIZED: GEOPOLITICS IN THE PANDEMIC 09 DRIVERS AND IMPLICATIONS OF THE DIGITAL ECONOMY 13 A FRACTURING SOCIAL CONTRACT 18 CONTACT TRACING AND TECHNOLOGICAL SOVEREIGNTY 22 RECOMMENDATIONS AND TOPICS FOR EXPLORATION cgc.ie.edu THE NEW DIGITAL DOMAIN 3 EXECUTIVE SUMMARY The COVID-19 pandemic, besides triggering the most Today’s biggest winners are the big tech companies, who severe economic crisis since the Great Depression, is represent the lion’s share of the most valuable companies accelerating technological trends that were well in the that run on data, algorithms and apps rather than making before its outbreak. The Great Lockdown physical labor, but have also managed to utilize the exposed the digital divide between frontier and under-governed nature of the digital domain to non-frontier firms, with the former group being able avoid paying tax and social security. The societal to provide services and goods no longer available within flipside of the growing digital gaps between winners traditional markets. The growing concentration of and losers has been skyrocketing inequality and the power and wealth in the hands of a few global hollowing-out of the middle class—something that digital companies will shape global and domestic in the short term the pandemic is likely to exacerbate. politics in the immediate future. Globally, the pandemic has increased geopolitical THIS REPORT ANALYSES THESE SHIFTS, rivalry and underlined the decline of the US as a PROPOSES A SERIES OF RECOMMENDATIONS superpower. At the same time, it has highlighted the FOR GLOBAL AND ECONOMIC GOVERNANCE, fact that geopolitical confrontation is increasingly AND IDENTIFIES OPPORTUNITIES TO taking place in the digital domain and among IMPROVE THE SOCIAL CONTRACT IN THE private companies. The information space has been DIGITAL ERA. overloaded by an ‘infodemic’ and cyberattacks directed at hospitals, research institutes and universities have soared in the race to discover and market a vaccine. Domestically, states are struggling with a loss of technological sovereignty in terms of governing data and unilaterally taxing the winners of the digital economy. Some of the largest European governments have been unable to implement their own contact-tracing protocols due to the stranglehold of Apple and Google. At the same time, there are serious concerns regarding data privacy in both centralized contact tracing as well as using the Apple/Google protocol should such national protocol be imple- mented, which further underlines the importance of data privacy in the twenty-first century. THE NEW DIGITAL DOMAIN 4 DIGITALIZED AND PRIVATIZED: GEOPOLITICS IN THE PANDEMIC DIGITALIZED AND PRIVATIZED: GEOPOLITICS IN THE PANDEMIC 5 The “Unipolar moment” with the US as the sole While it is still early to gauge the full impact of the superpower has been fading in recent years, due to both pandemic on the US, both domestically and inter- the rise of revisionist powers and a general diffusion of nationally, the results of a survey of 982 US international power. Both Russia and China have become increasingly relations professors may be illuminating.3 92% saw that assertive, and the challenge to the US is now more COVID-19 was making the US less likely to be widely severe. In economic terms, the US has never had an respected in the international system, and 76% believed antagonist with the same economic power as China. In that the US is less likely to be seen as a state with un- nominal terms, Chinese GDP is 66% of US GDP (and matched material power and capabilities in the future. greater in PPP terms), whereas the GDP of the Soviet Union in 1980 was 40% of the US GDP, and Nazi Germany only 26%.1 Donald Trump has contributed to the worsening of relations with US partners—most notably the EU—as well as attempted to weaken the foundations of international order. Trump “wants to destroy the alliances, trading relationships and international institutions that have characterized the American-led order for 70 years”.2 The pandemic is likely to speed up this process. — The US handling of the pandemic has been, at best, ineffective and shows its decreasing appetite for multilateralism and global governance. — The US handling of the pandemic has been, at best, ineffective and shows its decreasing appetite for multilateralism and global governance. This culminated in the halting of funding for the WHO, but also included blocking the WTO’s dispute-settling mechanism, defunding UN institutions and programs, and criticizing NATO. 1 Krepinevich, A., 2017, “Preserving the Balance: A U.S. Eurasia Defense Strategy”, Center for Budgetary and Strategic Assessment. 2 Schake, K., 2018, “The Trump Doctrine Is Winning and the World Is Losing”, New York Times. 3 Jackson, E. et al., 2020, “What Foreign-Policy Experts Make of Trump’s Coronavirus Response”. DIGITALIZED AND PRIVATIZED: GEOPOLITICS IN THE PANDEMIC 6 CONFRONTATION IS INCREASINGLY IMPACTING PRIVATE COMPANIES Friedrich Engels stated that the character of war changes This is seen in the clash between the digital infra- with the character of the economy. In slave-owning structure developed in Silicon Valley and that developed societies, the goal of war was to capture more slaves, in China. The former, designed around market dictates, whereas in industrial societies, the goal was to capture takes advantage of the under-governed digital economy more resources and access to new markets.4 Today, we to place tremendous value on the data collected and live in a knowledge economy, or perhaps an attention generated online, while the latter uses these same data economy, where the key economic winners are the big as a tool of social, political and economic control. Indeed, technology companies. One manifestation of this was seen China is actively exporting this model to illiberal and in January 2020, when the value of Apple surpassed that autocratic regimes tempted by the power of online control. of the DAX30, Germany’s thirty most valuable companies. The ongoing controversy over allowing Huawei to build This trend is likely to increase in the future. Much of the 5G-networks in Europe is a case in point. Under pressure innovation in tomorrow’s technologies is concentrated from the US, the UK changed its position and banned in the big technology firms, which are predominantly telecom providers from using Huawei and required them based in the US and in China. Europe is lagging behind, to remove all their components by 2027.6 Another with European firms capturing only 11% of global example is the US Department of Commerce requiring venture capital in 2016, and only four of the top 100 AI all semiconductor firms using US equipment to apply startups in 2018.5 The increasing importance of the for licenses to sell to Huawei.7 The move has arguably technological domain is accompanied by increasing targeted the TSMC (Taiwan Semiconductor Manu- geopolitical competition. This has given rise to a facturing Facility), which is Huawei’s main supplier for technological arms race, in which states are leveraging semiconductors and would set them at a clear dis- their national capabilities to gain ownership of every- advantage.8 This shows how private companies are thing from data, talent, companies and access to the increasingly a battleground, as tomorrow’s power will materials needed for production. stem from those controlling and innovating in mostly civilian sectors. 4 Peralta, A. 2005. Med andra medel: från Clausewitz till Guevara: Krig, Revolution, och Politik I en marxistisk idétradition [By other means: From Clausewitz to Guevara; War, Revolution, and Politics in a Marxist ideational tradition]. Munkedal, Sweden: Glänta Produktion, p.96. 5 Bughin, J. et al., 2019, “Tackling Europe’s Gap in Digital and AI”, McKinsey Global Institute. 6 Kelion, L., 2020, “Huawei 5G kit must be removed from UK by 2027”. 7 US Department of Commerce, 2020, “Commerce Addresses Huawei’s Efforts to Undermine Entity List, Restricts Products Designed and Produced with U.S. Technologies”. 8 Blank, S., 2020, “The Chip Wars of the 21st Century”, War on the Rocks. DIGITALIZED AND PRIVATIZED: GEOPOLITICS IN THE PANDEMIC 7 CONFRONTATION IS INCREASINGLY DIGITALIZED Geopolitical confrontation is not only about strategic The pandemic in and of itself has created a notable ownership and access to material, but also operates on increase in disinformation, cyberattacks and cyber the platforms of big technological companies. Facebook intrusions. The president of the European Commission and Google are information networks that have become Ursula von der Leyen surprised many when she openly the infrastructure through which we understand the world, called China out for cyberattacks against hospitals and perceive power, and legitimacy. As Sara Smyth puts it, healthcare institutions in Europe.14 The European External “the process of collecting and organizing information Action Service initiative to combat disinformation is now a tremendous source of economic, political and EUvsDisinfo stated that, in the pandemic, cultural power. Data makes us more malleable, easier to — predict, and extremely prone to influence”.9 Despite their potentially grave Moreover, their business model is premised on their ability impact on public health, official and to manipulate flows of information through advertising.10 state-backed sources

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